Indian markets traded in the deep red on Friday, with Sensex and Nifty seeing significant declines. Investors remained cautious ahead of a crucial US jobs report that could shape the pace and size of the Federal Reserve’s interest rate cuts. Selling pressure was witnessed across all sectors.
The BSE Sensex slipped below 81,200, trading over 1,100 points lower. Meanwhile, Nifty50 dropped below the 24,900 mark. The market capitalisation of all listed companies on the BSE declined by ₹5.3 lakh crore to ₹460.35 lakh crore.
Among the Sensex stocks, Reliance Industries, SBI, ICICI Bank, L&T, Infosys, ITC, HCL Tech, and HDFC Bank were the primary contributors to the index’s decline.
Sector-wise, the Nifty PSU Bank and Oil & Gas indices dropped by over 2%, while the Auto, Bank, Media, Metal, and Consumer Durables sectors declined by over 1%. Domestically-focused small-caps fell 0.9%, and mid-caps slid 1.3%.
In contrast, Ashoka Buildcon surged 6% after its subsidiary Viva Highways monetised Pune land for ₹453 crore.
1) Nervousness builds ahead of key US jobs data
Investors grew increasingly nervous ahead of the US non-farm payrolls report, due later today, which led to a decline in Indian equity markets. Federal Reserve Chair Jerome Powell recently emphasized that policymakers do not welcome further weakening in the labor market, signaling the possibility of a rate cut in September.
Analysts are predicting an increase of 165,000 new jobs and a slight dip in the unemployment rate to 4.2%. However, concerns have been growing after softer job openings and weaker gains in the private sector, which have raised the likelihood of a half-point rate cut to 42%.
“If the August jobs data, due later today, falls short of expectations and unemployment rises higher than forecast, the Fed may cut by 50 basis points,” said Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
“However, this may not be well-received by the market, as serious growth concerns and fears of a hard landing for the US economy could weigh heavily,” he added.
2) Decline in bank stocks ahead of loan and deposit growth data
Indian equity indices also fell as heavyweight financial stocks declined, driven by concerns over upcoming data on bank loan and deposit growth, due later today.
Meanwhile, the latest Reserve Bank of India (RBI) data revealed that deposits grew by 11.7% in the June 2024 quarter, while bank credit surged by 15%. This widening gap between deposit and credit growth has raised concerns about potential liquidity issues, heightening investor anxiety and contributing to the decline in bank stocks.
3) Tepid Global Market Mood
MSCI’s broadest index of Asia-Pacific shares outside Japan edged 0.2% higher, despite having fallen 2.3% so far this week. Meanwhile, Japan’s Nikkei slipped 0.1%, bringing its total weekly decline to 3.9%.
China’s share markets opened with mixed performances, while Hong Kong’s Hang Seng remained flat. The nervous sentiment in the markets also impacted US futures, with Nasdaq futures down 0.6% and S&P futures slipping 0.3%.
4) FIIs turn net sellers
Foreign institutional investors (FIIs) turned net sellers on September 5, offloading equities worth ₹688 crore. In contrast, domestic institutional investors (DIIs) were net buyers on the same day, purchasing equities valued at ₹2,970 crore.
Crude Oil
Oil prices remained flat in early trading on Friday as investors balanced a significant withdrawal from U.S. crude inventories and a delay in production hikes by OPEC+ producers against mixed U.S. employment data.
Brent crude futures rose by 1 cent, or 0.01%, to $72.70, while U.S. West Texas Intermediate (WTI) crude futures inched up 2 cents, or 0.02%, to $69.16.
Rupee vs Dollar
The Indian rupee strengthened on Friday, buoyed by disappointing U.S. private payrolls data, which fueled expectations of a weaker overall jobs report. This prompted traders to avoid the U.S. dollar.
At 9:30 a.m. IST, the rupee was trading at 83.9350 to the U.S. dollar, up from 83.9825 in the previous session.